1. What is Monthly Interest?

Monthly interest is the amount charged by lenders each month for borrowing money, calculated as a portion of your outstanding loan balance. It's a key component of your mortgage payment.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Annual interest rate (decimal)

Explanation: The formula converts the annual rate to a monthly rate by dividing by 12, then applies it to the principal balance.

3. Importance of Monthly Interest Calculation

Details: Understanding your monthly interest helps you budget for mortgage payments, compare loan offers, and plan for early repayment strategies.

4. Using the Calculator

Tips: Enter the principal amount in USD and annual interest rate as a percentage (e.g., 3.5 for 3.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this the same as my total mortgage payment?
A: No, this calculates only the interest portion. Your actual payment may include principal, taxes, and insurance.

Q2: Why does interest change over time?
A: With amortizing loans, interest decreases as principal is paid down, unless you have an interest-only loan.

Q3: How does extra payment affect interest?
A: Additional principal payments reduce the balance faster, resulting in less total interest paid over the loan term.

Q4: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs, while the interest rate is just the cost of borrowing the principal.

Q5: Are there loans with different interest calculations?
A: Yes, some loans use daily interest calculations or compound interest, but most mortgages use simple monthly interest.